Home Buyers Still Face Mortgage BarriersThe housing market is still operating at very depressed levels, despite low interest rates and lots of pent-up demand. But many buyers seeking a mortgage find that the hoops are being held very high. It's tough to jump through them all. From the credit score review to the appraisal process, each step is an ordeal for the potential buyer.

The housing market is still operating at very depressed levels, despite low interest rates and lots of pent-up demand. But many buyers seeking a mortgage find that the hoops are being held very high. It's tough to jump through them all. From the credit score review to the appraisal process, each step is an ordeal for the potential buyer.

ROBERT SIEGEL, HOST:

While rents rise, home prices keep drifting lower. On the bright-side for homeowners and homebuyers, mortgage rates are at record lows. Refinancing can save many owners hundreds of dollars a month, if they can qualify to get those low rates. And many Americans are qualifying and refinancing. But millions, it seems, who arguably should qualify have not been able to.

SIEGEL: And, first, why isn't it a simple matter here that if someone owns a house, you can tell what the value is, you can see what the credit rating is, they apply to refinance, why shouldn't they be approved pronto?

ARNOLD: Well, it would be nice if things worked like they're supposed to. It is part of the answer probably. But let's first talk about one question that you asked there: How much is your house worth? That's a subjective question, and it's going to be a subjective number. And the person who gets to decide that is - if I can quiz you here on this process.

SIEGEL: Some guy with a camera, from what I can tell.

(SOUNDBITE OF LAUGHTER)

ARNOLD: Right. And that guy is the home appraiser. And the rules have changed governing these home appraisers. It used to be that the bank itself, or your lender, could have their favorite home appraiser who knew your neighborhood really well and could pinpoint exactly what your home is worth. But during the housing bubble that led to all kinds of shenanigans with shady lenders hiring shady appraisers, and they would inflate prices.

SIEGEL: So that's the way things were. It turned out to be a terrible bubble. On the other hand, it was awfully easy to get a refinance of your mortgage, or to get approved for a mortgage.

ARNOLD: Right. It used to be too easy. The appraisers were part of the problem, so Congress changed the law. And that's had some unintended consequences. And to make a long story short, what sometimes happens now is the lender says, OK, we need an appraiser for Robert's house. And an email goes out, blasted out to a hundred different appraisers across the entire state. And the email says something like: Hey, who wants to do this for a hundred bucks. You know, so the guy you get might be driving in from 50 miles away and really have no idea what the homes in your neighborhood are worth.

SIEGEL: OK, so that's one problem. But we've also been hearing about federal programs that are out there to help people refinance, even if their home has fallen in value and it gets a low appraisal. Shouldn't that help them get around that problem? Why isn't that working?

ARNOLD: I think this is really interesting that, yes, the acronym for this program is HARP. This program is supposed to take some big hedge clippers to the briar patch and carve a gateway to walk through for people to be able to refinance. And as long as you've got a loan that's about three years old or older, and you aren't missing payments, this program should be available to almost anybody in the country. But so far only about a million people have been able to refinance this way. And so, that just tells you something is not working.

SIEGEL: What trips people up in the HARP program? Why only a million?

ARNOLD: Well, we could go way down into the weeds here, but the headline is lots of friction in the system. And that involves fees get charged for people that make them question whether or not this is worth it. Also, to oversimplify a little bit, the lending industry at large is making money off of homeowners who are stuck at 6 percent interest rates or higher, so they're collecting that 6 percent interest rate. So, some of the key players here are not overly eager to refinance everybody into 4 percent loans where they make less money.

SIEGEL: Now, if you've spoken to anybody who's been trying to refinance and has been having problems or facing delays, this is terribly frustrating. But in the bigger picture, for the economy, does it really matter? Does refinancing matter?

ARNOLD: I think it does. If you could take 10 or 20 million more Americans, and put $3,000 in their pockets to go out and spend in the economy and feel more confident about it, there's a lot of economists who feel like, look, this could be a boost to the housing market and the economy.

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